In his career finale, a pioneering investor aims to lead a massive shift in communications.

Last week, Japanese investment giant SoftBank announced that it had closed $93 billion in committed capital for its massive Vision Fund, putting it within striking distance of the $100 billion target it announced last year. The Vision Fund dwarfs even the world’s biggest private equity vehicles, including the $22.5B mega fund that Apollo Global Management announced last month set to have been the largest in recent history. The Vision Fund would exceed the size of the five biggest private equity funds combined, according to investment research firm Pitchbook.

ARM acquisition provides a launchpad into IoT

Since the Internet boom of the late ‘90s, Softbank has set the pace for tech investing, betting huge sums to chase the rapid growth of the Internet, then retail distribution via online portals. It has made tens of billions in returns from investments in companies from Alibaba, to Yahoo and Supercell Oy. The first closing of the Vision Fund comes just three months after Softbank’s founder, Chairman and CEO Masayoshi Son made the biggest bet of his career with the $32 billion acquisition of chipmaker ARM Holdings Plc. ARM provides technology for 95% of all smartphones and seems poised to play a central role in the emerging “Internet of Things” (IoT) market that will network devices, vehicles, and buildings via remote sensors and processors. “ARM will be the center of the Internet of Things, in which everything will be connected,” he told reporters. “IoT is going to be the biggest paradigm shift in human history (and) we have always invested at the beginning of every paradigm shift.”

Venture capital vehicles, known for making the types of tech investments the Vision Fund is targeting, are typically even smaller than the giant private equity funds. For example, Technology Crossover Ventures’ 2007 fund VII was one of the biggest in history at only $3 billion. Only a small group of the hundreds of venture funds have established vehicles that total more than $1 billion.

Which markets will bloom with Vision Fund investment?

Industry observers wonder whether a behemoth investor of this size with considerable technology synergies will hit the ecosystem of venture investment like an asteroid landing on a desert island. According to analyst Kyle Stanford, the specter of price inflation for early-stage investments is already haunting the investment meetings at venture firms. “The fear is all rooted in the 2014, 2015 investment environment, where there were tourist investors and valuations were getting out of control, and when valuations get too high it limits exit opportunities,” Stanford explains. “When you see a fund of $100 billion coming in already making big headliner deals, I think that fear is going to come back.”

Those headliner deals depend on a healthy crop of well-financed growth stage deals, which have been on the decline even as overall investment activity has picked up, with first financing activity falling for seven consecutive quarters.

First financing activity has fallen for seventh consecutive quarters

Source: Pitchbook

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Over the short term, competition for top tier deals will heat up startup valuations, but the Vision Fund is also bound to have a profound impact on the kinds of technologies that get to market and their pace of development. $100 B in ambitious capital will drive investors to expand their investment activity to new technologies and markets.

One candidate is precision ag. With its ambition, its vision and it’s unique perspective as a Japanese company, Softbank seems set to play in the next chapter of the telecommunications revolution– beyond the internet, beyond urban networks to address the big challenge of feeding a population of 9 billion.

By 2050, 14 of the world’s 20 biggest metropolises will be in Asia and Africa, including Jakarta, Manila, Karachi, Kinshasa and Lagos as well as Tokyo, Shanghai. and Mumbai, according to a projection by Demographia. It takes about 1 acre to feed the average U.S. consumer. China only has about 0.2 acres of arable land per citizen, and an estimated 20% of that land is contaminated with toxic pollution. As a result, Chinese have been investing aggressively outside of China to produce food for their home market. High profile purchases include Australia’s biggest dairy operation and US-based Smithfield Foods.

Precision agriculture is a “must win” market for IoT leadership

As the world’s population grows, outright purchase of existing food production facilities will not suffice. Technology will be essential to feed burgeoning populations. Precision agriculture will be more than enabling technology, it will be essential for survival; to feed an increasingly crowded planet. This will be a “must win” flagship market for major technology and communications companies, from Intel and Softbank’s ARM to communications companies like Softbank’s Sprint, Verizon, BT and Telstra.

As leading corporations shift to restorative production, water engineers will find themselves at the center of the first wave.

Almost 50 years ago, the humankind first saw our planet in a galactic context and transformed engineers’ perspective on manufacturing. These first “selfies” of the earth showed our entire world as an isolated blue marble with the vast void of space, the single location where humans could survive. Space had been the passion storytellers and philosophers, but the dream of space travel had been realized by leading-edge scientists and engineers.

During the 1960s, a new science of industrial ecology redefined industrial operations for the limited resources of a “spaceship world.” In the Economics of the Coming Spaceship Earth (1966), Kenneth Ewart Boulding describes a global transition from a “cowboy economy” that naively exploits resources in a world that is a “virtually illimitable plane.” Humankind had begun to see the earth as “a single spaceship, without unlimited reservoirs of anything, either for extraction or pollution.” With all of our resources already onboard, economic well-being cannot be defined simply by the rate of consumption or production: “Man must find his place in a cyclical ecological system which is capable of continuous reproduction of material form,” Boulding wrote. Later, Buckminster Fuller’s Operating Manual for Spaceship Earth laid out a new paradigm for designing operations to balance production and well-being with an eye towards future productivity and resources.

Untangling Supply Chains

In 2013, champion solo yachtsman Dame Ellen MacArthur brought the looming waste and raw materials crisis into stark focus at the World Economic Forum. She harked back to images of ships: “At sea, what you have is all you have, stopping en route to restock is not an option, and careful resource management can be a matter of life or death …My boat was my world, I was constantly aware of its supply limits, and when I stepped back ashore, I began to see that our world was not any different. I had become acutely aware of the true meaning of word ‘finite,’ and when I applied it to resources in the global economy, I realized there were some big challenges ahead.” Since then, the MacArthur Foundation has worked with a growing group of partners to organize an initial group of industrial consortia to untangle complex and ever widening supply chains. In 2016, it convened leading companies, city governments philanthropists and policymakers to rethink the future of plastics.

Last week, leaders in the fashion industry announced the Circular Fibres Initiative at the Copenhagen Fashion Summit with industry leaders such as Inditex, H&M, Adidas, Kering, M&S, Bestseller and Nike pledging their support. While manufacturing processes may not be as resource-intensive as mining or electronics manufacturing, the clothing industry can realize critical efficiencies with circular manufacturing and product design. According to McKinsey, clothing production has doubled between 2000 and 2014. Consumers are spending an estimated 60 percent more on clothing and using that clothing for half the time they did 15 years ago. In the US, up to 85 percent of those textiles go to landfill, with precious raw materials lost for the future. The initiative aims to create a vision for a new global textiles system that will replace the linear, “take-make-dispose” model dominating the industry, with a goal of eliminating all textile waste by the year 2037. Initial work by MacArthur, McKinsey, and others has been followed by initiatives from the apparel industry. Signatories of the Call to Action committed to defining a circular strategy, setting targets for 2020 and reporting on their progress.

At the BlueTech Forum in Dublin on June 7, senior operations and sustainability executives from leading corporations will be meeting to discuss how they’re translating circular economy strategies into their work plans. Artemis principal Laura Shenkar will be leading a roundtable discussion with Menno Holterman CEO, of Nijhuis Industries.

Where is the “lowest hanging fruit” for water in circular economy initiatives?

Is water the natural starting point for the circular economy?

Eliminating waste is one of the magical overlaps between business and the environment. According to the Ellen MacArthur Foundation, circular supply chains that increase the rate of recycling, reuse and remanufacturing could generate more than $1 trillion a year by 2025. Moving from a linear economy, where raw materials are used once and thrown away, to a circular economy where inputs are reused and waste eliminated, is a long-term economic imperative if we are to support a world population of nine billion.

Dow Water is among the first industry incumbents to plot a market strategy aimed at the circular economy. It is offering an alternative to Zero Liquid Discharge (ZLD) solutions, that it calls “minimal liquid discharge” (MLD). MLD is a toolbox of products and proprietary system designs that Dow claims deliver low-risk benefits today and incrementally while building toward the long-term promise of the circular economy. “In a perfect world, industry could reclaim and reuse 100% of the wastewater it produces. But in the real world, many companies find that this goal.. is costly and difficult to achieve,” notes Snehal Desai, Dow Water’s Global Business Director.

Real world alternative to the holy grail of ZLD?

For decades, policy leaders have touted zero liquid discharge (ZLD) as a cornerstone for forward-looking water projects, from gargantuan Chinese desalination facilities to new manufacturing sites in Island Nations and US power plants. As water becomes scarce and disposal costs skyrocket, manufacturers see the immediate value of decreasing waste. However, moving real-world operations toward zero waste isn’t an overnight event. “If there was ever a Holy Grail of water recovery and reuse in an industrial plant, then it is undoubtedly … ZLD,” wrote industry pundit Gord Cope in 2009. “While it may be difficult and expensive to achieve, zero liquid discharge is easy to define.” Eight years later, analysts continue to project a future market for $100M – $200M annual revenues on the horizon. Although ZLD holds great promise to reduce water pollution and augment water supply, its viability is determined by a balance among the benefits associated with ZLD, energy consumption, and capital/operation costs,” membrane experts Tiezheng Tongand Menachem Elimelech of Yale University noted in a recent survey of leading-edge low-energy membrane solutions.

“Discharge mitigation efforts don’t need to be an all or nothing proposition,” explains Desai. By combining state-of-the-art equipment and proprietary systems design, Dow claims that it can provide 95% of the benefit of ZLD at less than half the cost. In choosing its strategy to help customers shift operations, Dow is leveraging more than its product technologies, drawing on decades of experience with diverse operations around the globe. Moving from a model of “selling stuff” to a model of selling performance reflects the vision of the circular economy. Dow is aligning itself with the long-term strategy of many of the world’s leading manufacturers to reduce risk in their supply chain driven by circular economy initiatives by the World Economic Forum and other business leadership collaboratives.

Case study: General Motors’ San Luis Potosi, Mexico Assembly Plant

One early case study is the General Motors (GM) vehicle assembly plant in San Luis Potosi, Mexico (about 400 km northwest of Mexico City), which opened in 2008. The plant, which has an annual capacity of 160,000 cars, is located in an arid, remote area with no receiving stream or municipal sewer available to discharge wastewater. Through a combination of reverse osmosis (RO) technology, a proprietary high-rate chemical softening process, and other technologies, the plant can convert up to 90% of its tertiary wastewater into reusable water, leaving less than 10 percent of liquid waste for discharge into adjacent solar ponds for evaporation.

Collaborative economics of water at community scale– a new challenge for global giants

Desai sees scarcity and regulation driving new models for water management. “There are new economics for water that are driving an innovation revolution, not just focused on products and technology, but a fresh take on how businesses, governments, and other stakeholders work together,” Desai explains. “Collaboration can help drive advancements in technology and new methods for valuing natural capital.” For example, the Dow Terneuzen site in the Netherlands is the city’s largest employer and heaviest industrial water user. Dow collaborated with the municipal water board and a local water company to implement an innovative wastewater recycling program that uses every liter of water three times, instead of just once. As a result, the plant has reduced the energy use associated with water treatment by 95 percent– the equivalent of reducing its carbon dioxide emissions by 60,000 tons each year.

With a vast global presence in water operations and a parent company that is one the world’s biggest manufacturers, Dow Water has a unique view of market drivers for new water equipment. MLD’s approach and its early results are worth watching. Join us at the Cleantech Forum’s Water Summit to hear more from Dow Water’s Senior R&D Manager, Abhishek Shrivastava. See more useful resources on the circular economy below.

Images: Top and Middle courtesy of Dow Water

As US infrastructure crumbles and water supplies dwindle, the cities that are leading deployment of distributed water solutions are finding an economic upside to their water woes– new businesses and new jobs. Distributed water systems save water by treating and reusing water onsite, and those systems require a new breed of engineers. In addition to the almost 300,000 workers that are needed for the US’s existing water systems, onsite water systems will require certified mobile engineers to maintain distributed systems in offices, stores, hospitals and other commercial and residential buildings.

How many jobs in modernizing water infrastructure?

The towns and the businesses that move early to implement distributed systems may see the same kinds of jobs and economic growth that the solar and wind industries have generated in early-mover markets like Texas and California. The businesses that build the first onsite water systems are positioned to equip neighboring areas with those solutions and grow rapidly. According to the Solar Foundation, the solar industry has outpaced most sectors of the US economy, adding workers at a rate nearly 12 times faster than the overall economy and accounting for 1.2% of all jobs created in the U.S., resulting in over 115,000 new domestic living-wage jobs.

Water engineers fashioned California into an agricultural giant and built some of the world’s greatest cities through monumental infrastructure projects, from the Hoover Dam to the LA Aqueduct and the State Water Project.

Today, that centralized water system has caught the West in a Gordian knot of huge sunk investments and behemoth government agencies. Untying that knot will be a defining challenge for the West in the next decade. As California grows and water supplies dwindle, the West has no choice but to pioneer new approaches to water management. Water built the West, and how we deploy water innovation will define our future.

Men stand in a 45 ton steel pipe over the Hoover Dam, 1935 Image: US Bureau of Reclamation

Market analysts are predicting a $532 billion boom in US infrastructure investment over the next decade to address deteriorating piping networks, combined sewer overflows, and rising population demands for new water supplies. However, it’s unclear where our cities will find the money for those investments.

To survive, California must do more than stretch the limits of engineering and science; it needs to deploy new financial models, new policy and integrate water with energy infrastructure.

We need to decide what parts of the Western tradition of monumental water engineering we’re going to tap into, and what parts we leave behind. Even with an arsenal of proven technology solutions, we need a new vanguard of leadership to redefine water in the West.

How do we untie the knot?

With such urgent problems and looming economic risks, why has it been so difficult for advanced technologies to gain momentum? Simply put, water is too cheap to pay for itself today, and in the US, it’s not ever going to get very expensive. In the US, providing clean, healthy, affordable water to communities and to businesses is a basic responsibility of government. With water so cheap, most property owners and cities can’t justify the upfront capital investment to retrofit their onsite water systems, even when they can see a trail of long-term savings.

Even more, distributed infrastructure needs more than finance, people in the US want the same kind of utility oversight that they have enjoyed with centralized water systems. CA water utilities need to evolve with the systems to ensure that they provide healthy water and sanitation.

Financial innovation to deploy proven water tech

Where our existing municipal finance structures have funded centralized water over the last century, a new breed of investments is unlocking the market for distributed water. Among the most promising of these are third-party finance vehicles adapted from rooftop solar.

Finance vehicles group a series of smaller distributed projects into single investments of $20M or $100M. These distributed projects partner with utilities to offer water infrastructure as a turnkey service to property owners. Many of the most promising opportunities for “Infrastructure as a Service” pay for themselves based on energy savings or even energy generation.

A proposed series of wastewater thermal energy projects in Washington DC provide one early example of how finance vehicles could bridge the gap between centralized water infrastructure and tech-driven distributed water projects. Wastewater thermal energy generates a source of resilient renewable energy, and earlier this year, the District of Columbia has recognized WWTE within its Renewable Energy Portfolio Standard. A series of onsite projects would provide wastewater geothermal energy to replace conventional heating and cooling. Using third-party finance vehicles, DC Water would be able to charge for the use of the thermal capabilities of its system, generating revenues to supplement its operating budget. Property owners, such as DC elementary schools, would acquire this low-carbon HVAC as a service for no money down, paying as they saved energy and water as compared with conventional HVAC. DC Water projects that it can generate 200 MW of power through the existing sanitary sewer system to replace energy and water-hungry heating and cooling, in schools, hospitals, offices and commercial sites.

Distributed water can do more than help us survive in a drier, more crowded future; it can fuel growth, create jobs and build new global leadership.